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To: Gabriela Neri who wrote (5882)	1/14/1998 10:15:00 PM
From: Abner Hosmer	Read Replies (2) \| Respond to of 116764

He said that "the impact of this situation will be manageable and the spillover effects will be reasonably moderate." Excerpts from a lengthy article: Federal Reserve Bank President Alfred Broaddus said Wednesday that the Asian financial crisis has made the upside and downside risks to the economy "more equally balanced," but indicated he still thinks the upside risks predominate... "The reflow of internationally mobile capital into U.S. dollar assets due to the problems in Asian markets and the fear they may spread to other emerging markets, may be holding U.S. long-term interest rates down and preventing the natural market-induced rate increases from playing the healthy restraining role they normally play when the economy is booming as it appears to be doing now," Asked whether the flat-to-inverted yield curve might not portend a weakening of the economy as has been the historical pattern, Broaddus indicated that he thought this was not likely currently because of special circumstances. Unlike the past when inverted yield curves have resulted from Fed tightening or economic weakening, he said that the current flattening of the yield curve appears to reflect largely foreign capital inflows and diminished inflation expectations.. On the upside Broaddus said the economy is entering 1998 "with a lot of momentum ... . In this situation and with the economy already operating at a very high level in relation to capacity, especially in labor markets, and with another round of mortgage refinancing currently freeing up additional spending balances, there is clearly a risk the economy may overheat at some point. That in turn could produce rising inflation, rising interest rates and another boom-bust scenario," he said. On the downside, Broaddus said the Asian crisis should subtract a half percent or more from growth. He said high debt burdens could constrain consumer spending. He said he does not agree with those who "expect the stock market reaction to rising labor costs and reduced earnings to produce a much larger-than-anticipated market correction in 1998." ...Broaddus said that strong growth in and of itself need not be inflationary, "but if we at the Fed continue to support this above-trend real growth with above-target money supplygrowth, inflationary pressures could begin to increase this year and we could get the boom-bust sequence that has ended so many previous post-World War II business expansions." ... He added, "I don't see any significant risk of deflation." He said deflation, actual falling prices, would have to be a "monetary phenomenon," and noted that the money supply has been growing above target, not declining. ... A member of the audience asserted that the ongoing difficulties in Southeast Asian nations are much more serious than those that afflicted Mexico and its Latin American neighbors a few years ago. Broaddus acknowledged the two situations are different but said he was not prepared to make a judgment that the current crisis is worse. In fact, he said, unlike various Latin American nations, the Asian countries do not have a "credibility problem" with their monetary policies. What's more, he said, the Asian nations are "inherently strong" despite their "structural problems." He said the "underlying situation" in Asia is that the nations of that region have "enormous resources and huge capital" that make him skeptical of the "doomsday scenarios" proffered about the Asian outlook. He said that "the impact of this situation will be manageable and the spillover effects will be reasonably moderate." economeister.com

To: Gabriela Neri who wrote (5882)	1/14/1998 10:55:00 PM
From: Bill Grant	Read Replies (1) \| Respond to of 116764

Correct--but, as you indicate(I think), the long term implication is that inflation is already in the pipeline for the short-intermediate term. What's your prediction for the 1999-2001 Misery Index?

To: Gabriela Neri who wrote (5882)	4/10/2002 12:44:59 PM
From: long-gone	Respond to of 116764

Sure hope they look at the short side as well as the long! Trouble Brewing For Merrill Lynch Wed Apr 10, 9:10 AM ET It's not clear what he wants or where his probe is going, but the New York attorney general's investigation of Merrill Lynch could lead to trouble for the investment bank and its peers which are struggling to right themselves after suffering a black eye from the Internet stock deflation and the still-evolving Enron debacle. Merrill's (NYSE:MER - news) supposedly independent analysts' advice was in fact driven by the desire to obtain investment banking fees, according to Attorney General Eliot Spitzer. Spitzer alleges that there were specific quid pro quo deals between the firm and its investment banking clients in what he calls a "shocking betrayal" and "a major breakdown in the supposed separation between the banking and research divisions." Henry Blodget, once Merrill's star Internet analyst, who has since left the firm, was especially egregious in spewing opinions that were products of a conflict of interest, Spitzer says. Spitzer says his ten-month investigation will continue and could result in either criminal or civil charges against the firms or their employees. These charges, which have already resulted in a provisional court order against Merrill, are old hat in a sense. They have been aired in congressional hearings and in the industry. But Spitzer's office has added details in the form of Internal e-mails and sworn testimony that could lead to serious lawsuits on behalf of shareholders who lost when their Internet stocks, as well as others, went from hero to zero. Merrill says it is "outraged" by Spitzer's charges, which it says are based on a "fundamental lack of understanding" and are "just plain wrong." Its spokesman calls Blodget in particular "yesterday's news." But the idea that research departments have in recent years increasingly prostituted themselves to the investment bankers is widely held. Even inside the industry, the main question is what to do with the fundamental problem that research generates no fees and investment banking generates massive fees. Merrill Lynch (NYSE:MER - news) The real danger for Merrill--and the other investment banks under investigation, which Spitzer refuses to name--is that Spitzer adds details and his investigation could provide evidence to investors that those investors would be hard pressed to gain on their own, legal experts say. Another problem is that Blodget is no longer in the Merrill fold and is fighting with Merrill about his severance, according to sources close to the former analyst. Spitzer, for his part, says his efforts to reach a settlement with Merrill foundered when Merrill insisted all the evidence his office had uncovered be kept under wraps. That evidence could transform a vague sense of wrong into legal claims that are not readily dismissed. Lawsuits by investors who feel burned by spurious "price targets," talk of "monetized relationships" and hastily invented "metrics"--a few of which have already been made in court and in industry arbitrations--may suddenly gain a lot more weight. Analysts traffic in opinions, not facts. This has been a problem for scorned investors and their lawyers, because an opinion can't be "wrong." But it can be dishonest, legal experts say. "If an analyst sincerely believes in his recommendation of a bad stock, there is nothing illegal," says Jeffrey Gordon, a law professor at Columbia University. "But if the recommendation is the product of the analysts' [other] interests, that may well be securities fraud." The problem of proving "what the analysts actually believed" is extremely difficult, Gordon says. "People had a theory about there being a new economy, and based on that theory they got people to believe a story," he adds. Unlike the Enron (Other OTC:ENRNQ.PK - news) case, the underlying economics of these companies was for the most part not hidden. But if there is proof that the analysts were saying one thing publicly and something else privately, as Spitzer's evidence apparently shows, that may be fraud. In fact, much of the new-fangled Internet stock analysis was correct--for as long as people believed it. Amazon.com (NasdaqNM:AMZN - news) did go to $400, just as Blodget said it would. But this kind of analysis--also known as the greater fool theory--is not the kind of thing Wall Street wants to appear to be selling. Especially not after reality--the Internet companies were not even close to generating cash to sustain operations--has intruded. Merrill says it warned that Internet stocks were risky and that its analysts said most would never make money. It says analysts' comments calling stocks a "piece of crap" or "a disaster" were part of the give-and-take among the professionals rating the stocks. It insists that it has made reforms already. (See: No Problem But Merrill Fixes It) Still, there are problems of price targets and placing stocks on recommended lists. Merrill and Wall Street want to get past the Internet crash. They want to look to the future. But the bust is not exactly ancient history-- Pets.com left the scene almost two years ago and there may yet be bills to pay. story.news.yahoo.com